Demand remains robust for UK manufacturers

Manufacturing firms reported that order books were robust in August, while expectations for selling prices ticked up, according to the CBI’s latest monthly Industrial Trends Survey.

The survey of 432 manufacturers found that total order books and export order books were strong in August. The firming in export orders relative to the previous month reflected rising orders in 10 of the 17 manufacturing sub-sectors, led by mechanical engineering and aerospace.

Output growth remained strong and broad based and is expected to remain so over the next quarter. Meanwhile, firms’ expectations for output price inflation picked up again after having eased briefly. However, they remained lower than in the first half of 2017.

Stocks were considered to be just above adequate levels, after dipping below in July, but remained below the long-run average.

Anna Leach, CBI Head of Economic Intelligence, said:

“There are further signs that exporters are feeling the benefit from the lower pound in this month’s figures, and output growth is expected to power on over the coming quarter.

“But after a brief pause last month, expectations for selling prices have rebounded, indicating that the squeeze on consumers is set to persist. We expect CPI (Consumer Price Index) to top out at around 3% towards the end of this year and remain close to that level during 2018, as the effect of the weak pound continues to feed through.”

Key findings:

30% of manufacturers reported total order books to be above normal, and 17% said they were below normal, giving a balance of +13% - above the long-run average of -14%

22% of firms said their export order books were above normal, and 10% said they were below normal, giving a rounded balance of +11% - well above the long-run average of -19%

42% of businesses said the volume of output over the past three months was up, and 12% said it was down, giving a balance of +30% - above the long-run average of +3%

Manufacturers expect output to grow at the same robust pace in the coming quarter, with 38% predicting growth, and 7% a decline, giving a rounded balance of +30% - above the long-run average of +8%

Expectations for growth in average selling prices for the coming three months were higher in August (+19%) than they were in the month before (+9%) – above the long-run average of +2%

15% of firms said their present stocks of finished goods are more than adequate, whilst 11% said they were less than adequate, giving a balance of +4% – below the long-run average (+13%).